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The Big Story: Don't risk 'dabbling', be an SMSF expert

There's an increasing interest in self-managed super fund property deals - so how can brokers position themselves as experts?

Video transcript below:

Donna Sawyer, Australian Broker News TV
Donna Sawyer: Hi, I am Donna Sawyer and you are watching the Big Story on Australian Broker News TV.

Now is the time to get in the loop when it comes to doing self managed super fund property deals. Good mortgage brokers are brushing up on their skill set to position themselves as SMSF experts in the industry.

Matt Kidd, Omniwealth

Matt Kidd: Massive opportunity for brokers, I mean you know, if you have got an opportunity to set yourself apart from your competitor, absolutely why wouldn’t you do it. So go and find out how it all works, study it, immerse yourself in it. So when you are liaising with financial planners and accountants, they can see that you’ve done the homework.

Nicole Cannon, Pink Finance

Nicole Cannon: I definitely do think there is an increased of self managed super fund lending. I think in the height of the GFC where everything was in the superannuation and they started to, the balances started to drop a little bit, people are looking at ways to diversify their superannuation for retirement assets. So this is just another tool to help that, it’s not just shares, it’s just not putting all your eggs in one basket.

Donna Sawyer: But eager brokers are being warned to gain a solid understanding of the SMSF space before jumping in. Craig Morgan of SMSF Loans says brokers need to ensure that any deal is fully compliant and warns against relying solely on the advice of lenders.

Craig Morgan, SMSF Loans

Craig Morgan: You need to be all the way in or all the way out. What I am seeing at the moment is a lot of people dabbling in this area and a lot of non-compliant transactions being put together, those things are going to come back and haunt people later. And unfortunately this is an area where you cannot rely on the bank’s instructions as to being correct, because the lenders themselves are putting people into non-compliant transactions. They might well suit the bank and protect the bank thinks gives them the best possible protection, but somewhere along the line an auditor is going to pick that up and the question is should the broker have acted to avoid that.

Matt Kidd: It’s not like to walk into a branch and getting a bank loan. The many pitfalls such as setting up non-compliant fund or the fund being not compliant, i.e. the bare trust wasn’t set up properly, you know the corporate trust and the bare trust isn’t correct. There are so many things that can go wrong and you might have a lender who hasn’t ticked the boxes along the way and it comes down to settlement and it can’t settle because there is something wrong and that is purely because the broker didn’t understand what the responsibilities are of a trustee of a super fund to go and borrow that money, to settle on that property. So look a settlement could be missed.

Donna Sawyer: So what does a broker need to know before getting involved in SMSF property deals? Matt Kidd of Omniwealth says it’s vital to work closely with a financial planner or accountant.

Matt Kidd: We have had previous experience in dealing with the external brokers, who basically said that they understood SMSF and they didn’t and so there is a big difference between saying you understand it as opposed to going and actually understanding it. And then I think you know once you, once a broker can get themselves in that position, the strong relationship they can get with accountants and financial planners, their business is going to do a lot better.

Craig Morgan: Definitely need to know the ___ Act section 67A back to front, but need to have a good general awareness of the Sister Act across the board, need to know where that __ against things like taxation law, state law, there is a lot to know if you are going to, you know really get this right. Now you are not going to give that advice to the client, because you will be stepping into areas you are not licensed. You need to be able to have these conversations with the accountants and financial planners, the lawyers and indeed you need to be able to push back on the banks when they are getting wrong.

Nicole Cannon: I think it creates a great opportunity to align yourself with financial planners or accountants, because that’s something that they are starting to diversity into a little bit more. So it’s a great way to develop referral relationships and partnerships as well to expand and grow your business.